Cement price hike defended

Cement price hike defended

JAKARTA (JP): The government, in the face of incessant public criticism, said yesterday that its recent decision to increase the reference prices of cement by 40 percent was aimed at luring more imports and attracting investment.

Coordinating Minister for Industry and Trade Hartarto said Indonesia needed to import 2.5 million tons of cement and clinker -- a substance used in cement production -- this year to meet the increasing demand and to stabilize cement prices at market places.

"In the short term, the importation of cement is the only way to solve the problems caused by short supply. We have no other way," Hartarto told a press conference, which was also attended by Secretary General of the Ministry of Trade, Bakir Hasan, Director General of Foreign Trade Djoko Moeljono, and Director General of Chemical Industries Sujata.

Hartarto acknowledged that last week's decision to raise the price had not been based on domestic production costs but on international prices.

The new reference prices, averaging Rp 9,600 (US$4.32) per 40- kilogram sack, are now about the same as the international price levels.

According to Hartarto, a sack of cement is sold at an equivalent of some Rp 11,500 in Singapore, Rp 12,000 in Brunei, Rp 9,200 in the Philippines, Rp 8,500 in Malaysia, Rp 9,600 in South Korea, Rp 8,700 in India and Rp 13,795 in Japan.

The government has assigned four state-owned trading companies -- PT Tjipta Niaga, PT Dharma Niaga, PT Kerta Niaga and PT Mega Eltra -- and the existing cement companies to carry out the importation of 2.5 million tons of cement, Hartarto said.

Open

He emphasized that the importation of cement was open to any company and that the duty on cement imports had been lifted. "Everybody is welcome to import cement and, wherever you want to sell it, just go ahead, please. Nobody will hinder you," he said.

He said Indonesia would continue to import cement for the next two years because producers would only be able to meet domestic demand in 1998, when expansion projects and a number of new cement factories started production.

Retailers in a number of cities are reportedly selling cement at prices above the reference prices set by the government.

In Jakarta, for instance, retail prices of cement were between Rp 8,500 and Rp 9,500 per 40 kilogram sack yesterday, well above the new reference price of Rp 8,290.

When asked on the current developments in cement prices, Hartarto said: "We will just let prices float. I'm sure they will go down by themselves as soon as we can balance the supply and demand."

Critics have said that the new reference prices benefit only cement producers because, under the old reference prices they were already making large enough profits.

Responding to the criticism, Hartarto said: "It's true that cement producers were still able to make a profit under the old reference prices, but the profits were not enough to encourage reinvestment in the cement industry."

Hartarto also rejected the suggestion that the 40 percent increase in the cement reference prices could send this year's inflation into two digits, as indicated by Chairman of the Central Bureau of Statistics Sugito.

"We have to keep things in proportion, because the 40 percent increase in reference prices is based on the old reference prices, which were introduced in early 1993. So, the actual increase is not that much. And the government is committed to maintaining the inflation rate at less than 10 percent," Hartarto said. (rid)